Applying a Logic Chain to Trading

I was teaching a trading class today at a high school, and I did a intro on applying a logic chain to trading. A logic chain is essentially the steps and logic you use to make trades and manage your portfolio. A logic chain is not in any way a trading plan, but it should be applied in every trade written or not written. So question yourself? What is your logic chain? What logic do use from everywhere from the risk you are willing to take to your direction. If the trades doesn't fit the risk to your probability of success or risk to reward don't do the the trade. Does the trade fit your directional bias, does it give you an defined edge, does it fit your risk tolerance, and does it fit with your other positions. What criteria do you use to select trades (this is when it is more subjective)? Now this might start sounding like a trading plan, but it is not. Trading plans only fit a certain environment and markets and trading conditions change, so they are not valid. However, a logic chain is simply that. A chain of logic or a process you go through to select trades and manage your portfolio.

My logic chain is math based. The more subjective side is when I trade major markets and look at them. I will ask myself what is my opinions from the price action and news. Then I see if I can run studies that will give me any kind of edge in the current market situation. For example, volatility, the  SPX, and interest rates are all down one week and the next week they will do X 75% of the time? Then I will find the right way to implement the trade using impl vol, market conditions, options premiums, the way other markets are moving with the market I am looking at, and of course my current positions. Despite that, I may do trades that make more sense regardless of my directional bias. If the short iron condor trades makes the most sense I will do it, but if a pairs trade makes more sense I will do that. As for the rest of my positions it is all implied volatility based. What is volatility doing, where is it compared to the historical range, what our the options premiums, does the trade I want to do makes sense to implied volatility, and does the trade fit my portfolio. If the trade fits my portfolio, but it may not make sense compared to the stock I won't do it, but if they both make sense I will. Even if the paragraph might be a simplified version of everything I do it should serve as a good example. The trading rules I have is I never break my logic chain (my logic chain might change though), and I never take more risk than I feel comfortable with.